EghtesadOnline: Researchers at the Institute for World Economy IfW Kiel and DIW Berlin have analyzed the economic impact of jointly implementing punitive measures in the context of the 2012 Iran and 2014 Russia sanctions.
They find that coalitions serve two crucial purposes; they not only magnify the economic cost imposed on the target but also reduce domestic costs for sanctioning states, Eurasia Review wrote, citing a report by IDN-InDepthNews — a flagship of the International Press Syndicate Group, partner of the Global Cooperation Council.
The researchers use a model simulation to examine which impact on welfare the 2012 Iran and 2014 Russia sanctions had, looking at the targeted countries and the coalition countries. The model incorporates modern features of the global economy, such as global value chains, and features trade relations between practically all countries in the world. The year before the sanctions were imposed is used as the benchmark in each case.
The simulations find that the sanctions inflicted considerable economic harm: Russian exports were permanently 36% lower and imports over 30 percent lower than before the sanctions. This translates into a welfare loss of 1.5%, or roughly 10% of Russia’s welfare gains from trade openness.
For Iran, the drop was even more pronounced, with 41% of exports and 83% of imports down. Iranians experienced a welfare loss of 1.7%, constituting 12% of Iran’s welfare gains from openness. The effect of the sanctions occurred even though there was no cohesive, global coalition for the sanctions.